State Audit Says Railroad Contracts at Vermont Agency of Transportation Could Be Managed BetterAgency did not competitively bid $7.2 million in construction work; did not charge interest on late lease payments; and did not collect salvage proceeds properly, among audit findingsMONTPELIER (December 5, 2008) – The Office of Vermont State Auditor Tom Salmon, CPA, reported today that oversight of railroad construction contracts in the Vermont Agency of Transportation (VTrans) is inadequate and is costing the State money.”One conclusion of the audit is that the Rail Division is not ensuring that the required competitive bidding in these contracts is taking place,” said Deputy State Auditor George Thabault. “Contracts are being ‘sole-sourced’ and this denies other companies the opportunity to compete for State contracts, and may be keeping the State from getting the best price for goods and services.”The rail audit was conducted following a request made by VTrans that the State Auditor investigate the deficiencies of its rail section and suggest improvements.”We recognized that we had some issues within our Rail Division that needed correcting, and requested the Auditor’s assistance,” said VTrans Secretary David Dill. “On our own, we were unable to clearly identify our weaknesses in a way that both we and the railroads could understand. Our goal is to use the findings of this report as a catalyst to forge a new and better relationship with the companies that run our rail systems.”The audit report noted four key findings:1. VTrans and its railroad subcontractors did not follow procurement regulations designed to foster open, competitive bidding, resulting in $7.2 million of recent contracts with Vermont Railway and one of its affiliates not being competitively bid. The largest no-bid contract – for $4,677,727 – was also issued without the required approval of the Secretary of the Agency of Administration.2. Oversight and administration of rail contracts need improvement. For example, auditors found that $82,401 from rail project salvage proceeds was being held by Vermont Railway to offset against future invoices rather than being returned to the State as required by contract. (The Agency has since discontinued the practice of allowing the netting of salvage credits and has adopted new procedures to promptly receive and account for salvage payments.)3. Lease revenues and agreed-to performance requirements of leaseholders are not being verified, and VTrans has forgone $37,000 in interest stemming from late payments of monthly leases for State-owned track.4. The Agency did not adequately follow up on past audits which reported $436,000 of questioned costs related to contracts with Vermont Railway.For the project, auditors selected four contracts totaling $7.2 million dollars, approximately 44 percent of the total active rail construction and railway upgrade contracts during fiscal years 2007 and 2008. All contracts were between VTrans and Vermont Railway and Green Mountain Railroad, two companies of the Vermont Rail System (VRS), a privately held, affiliated group of short-line rail transportation companies that operates in Vermont.Auditors recommended that AOT strengthen and clarify the language within its rail agreements, improve the oversight of contracts, enforce penalties for violations of the terms and conditions of its contracts and lease agreements, and provide for better fiscal management of its contractors and service providers.In its response to the report, the Agency of Transportation generally agreed with the report’s recommendations and pledged to provide the State Auditor with quarterly status reports on corrective actions.”VTrans already has put in place new business practices that correct some of the Auditor’s concerns, and we certainly will make additional changes to rectify the remaining deficiencies,” Dill said. “VTrans recently hired a new Rail Program Manager, and one of his top priorities is to improve our rail business operations.”Background:The oversight of the railway network in Vermont is the responsibility of the Vermont Agency of Transportation Rail Program. Vermont’s rail system consists of approximately 748 miles of track or rail right-of-way. The State owns approximately 427 miles, of which 305 miles are currently active. Ten railroad companies operate or have the rights to operate on the rail lines in Vermont.For Fiscal Year 2009, the AOT total budget is $412.2 million. The Rail Section is allocated $16.8 million of this budget. The Rail Section currently has eight staff positions of a total of approximately 1,050 positions in the Agency. The complete audit report is available at www.auditor.vermont.gov(link is external). Click on “Audits & Reports” and then “Special Audits” to access the new audit report.
Credit is a subject that credit unions find incredibly familiar. It is the driver of everything we do, from our profit to our promotions to our processes. We understand what type of credit risk we want to take in our loan portfolio, we think about how we want to attract those borrowers that fit our preferred profile, and we chase credit recovery through collections efforts when our borrowers fail to repay. We know exactly what the extension of credit means for our institution. In a financial institution, a credit score is simply more numbers that are part of a larger calculation. However, I wonder how often we think about what credit means for the average, every day people we serve. Most of our members are not as familiar with credit scoring models as we are, and many do not watch their credit closely as a measure of their financial health. Credit may be the component of the 5 ‘C’s’ of credit that we may potentially take too seriously. We need to be willing to have a fuller understanding of what makes up an individual applicant’s credit score, and not just because we want higher loan yield or need to grow our portfolio. It is often easy to make a moral judgment about an individual based on their credit score. Credit scores tell stories. Good credit scores are stories of responsibility, of opportunity, and in some cases, of privilege. Some members are fortunate to have good credit because they have strong social ties willing to lend a hand in time of need, allowing them to keep their credit score pristine in times of challenge. Other credit scores tell stories of divorce, of disappointment, and of heartache. These stories are stories of an abrupt layoff, of an unexpected cancer diagnosis or car accident, or other unanticipated tragedy. Still others tell stories of lack of access – of neighborhoods populated with subprime lenders at ‘buy-here-pay-here’ car lots, check cashers and payday lenders. These credit scores may tell stories with deep histories. The numbers on paper cannot reflect the distrust in financial institutions behind the scores. An absent credit score may not fully tell the story of the member whose parent was redlined by a local bank, or how a family lost everything as a neighborhood declined around their property. The number on paper doesn’t reflect the challenges to access faced by that family, leading them to be un-banked or underbanked a generation or two later. A lack of credit score can reflect a history in a country with an unstable financial system. A lack of credit score can reflect a language barrier or unfamiliarity with the United States financial system. This lack of score can lead to lost housing opportunity, further perpetuating the cycle of spotty borrowing. Character is important. As a safe and sound institution, we want borrowers who will repay. This is not an article about lending to underserved communities, risk management or credit policies. Your own balance sheet and strategic plan will determine what that means for your institution. Still, credit has implications and has a legacy. In the United States, it has been used to create opportunity for some and has been a barrier to access for others. My institution, North Side Community Federal Credit Union, is one of a very small handful of credit unions in the country that operates a housing counseling agency. As part of our services, some of our staff meets with individuals for a lengthy two-hour credit counseling session. We see a wide range of stories. Yes, some have destroyed their credit with irresponsible financial management. Those stories come from all walks of life. Many more have never learned about credit or had an event beyond their control that rendered them unable to responsibly repay their debt. The one thing they all have in common is a desire to improve their credit, understanding it will improve their financial situation. As cooperatives, we have a unique opportunity to look beyond just the scores we see on paper. We have an opportunity to use credit to help people improve their lives and provide access to greater opportunity. This will look different based on each individual field of membership, but the balance sheets are not our primary mission. The balance sheet is simply the method by which we accomplish our mission. Recently, the CEO of a CDFI credit union shared how excited she was to offer an ITIN product. An outside observer commented to her that what her credit union was truly doing was offering hope to people. Hope is a rare commodity. If credit unions can offer that to people through the way we transact we can offer a unique value proposition that will be difficult for any other financial services provider to compete on. 49SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr,Sarah Marshall Sarah Marshall is a consultant in the credit union industry, and can be reached for partnership and speaking opportunities through Your Credit Union Partner. Her background in community development includes … Web: https://yourcupartner.org Details